Tax on Concessional Contributions

Budget measure

  • Requiring those with combined incomes and superannuation contributions greater than $250,000 to pay 30 per cent tax on their concessional contributions. This is up from 15 per cent, commonly referred to as the Division 293 threshold. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000. See Reforming the taxation of concessional contributions on the Budget 2016–17 website fact sheet page.

Current understanding

The current Division 293 threshold is $300,000 until the end of the 2016-17 financial year. This threshold will be lowered to $250,000 from 1 July 2017.

From 1 July 2017, anyone earning an adjusted taxable income greater than $250,000 will pay an extra 15% tax on their concessional contributions. For the purposes of Division 293 tax, these contributions will include:

  • any salary sacrifice contributions
  • any Superannuation Guarantee contributions
  • any employer productivity
  • any calculated notional (also known as employer defined benefit) contributions.

It is important to note that any concessional contributions below the concessional cap are included in a member's adjusted taxable income when calculating liability for Division 293 tax.

To understand the impact, two examples below compare the tax liability differences between the current threshold ($300,000) and the lowered threshold ($250,000).

Example for 2016-17 financial year (threshold = $300,000)

A member's adjusted taxable income was $290,000 and they had $25,000 of concessional contributions made up of:

  • Salary sacrifice contributions of $2,000
  • Employer Productivity of $5,000
  • Notional defined benefit contributions of $18,000

Division 293 tax is calculated as the lesser of the total concessional contributions OR the amount in excess of $300,000 when income and concessional contributions are added together.

In this case the member would be liable for $2,250:

$290,000 + $25,000 = $315,000

$315,000 - $300,000 = $15,000

$15,000 x 15% = $2,250.

Example for 2017-18 financial year (threshold = $250,000)

In the 2017-18 financial year, the Division 293 tax threshold is lowered to $250,000. Using this same income and contributions as the previous example, the member would instead be liable for $3,750:

$290,000 + $25,000 = $315,000

$315,000 - $250,000 = $65,000 - (total concessional contributions of $25,000 is the lesser amount in this example)

$25,000 x 15% = $3,750.

PLEASE NOTE: These are only examples and members should seek their own financial and tax advice in relation to their own personal circumstances.